It shouldn’t be too surprising that a record number of real estate sales is accompanied by a ton of new borrowing. Funds advanced, which is new mortgage credit issued or extended, climbed at a rapid rate in March. Borrowers took out a record amount of mortgage debt, with the majority of it uninsured.
Canadians Borrowed The Most Mortgage Debt In At Least 8 Years
The total of funds advanced had the biggest month in at least 8 years, but most likely much longer. Lenders advanced $53.27 billion of mortgage funds in March, up 29.0% from the month before. Compared to a year before, this represents a 48.7% increase. The monthly jump was the biggest since 2018, during the mini-bubble in TO and Vancouver. Now let’s break this down by segment, and see who’s buying, shall we?
Canadian Mortgage Funds Advanced
The monthly dollar value of mortgage funds advanced to borrowers, in billions of dollars. Source: Bank of Canada; Better Dwelling.Insured Mortgage Debt Saw The Largest Growth In At Last 8 Years
Funds advanced for insured mortgage debt, buyers with smaller down payments, was a fifth of the funds. Lenders advanced came in at $10.79 billion in March, up 21.5% from the month before. When compared to the same month last year, this represents a 13.8% increase. Despite representing a relatively small amount of the total, it was the biggest March in at least 8 years.
Canadian Mortgage Funds Advanced By Segment
The monthly dollar value of mortgage funds advanced to borrowers by segment, in billions of dollars. Source: Bank of Canada; Better Dwelling.Uninsured Mortgage Debt Is Growing 4x Faster Than Insured Debt
Uninsured mortgage debt is where the action is at, representing most of the funds. This segment saw $42.47 billion in funds advanced in March, up 31.0% from the month before. When compared to the same month a year ago, this represents a 61.3% increase. The dollar value is around twice that seen last year, which was the busiest March in years.
Funds advanced for insured and uninsured mortgages were both very high. Uninsured mortgage credit advanced by 4x the amount of insured mortgage credit though. This was the highest multiple in at least 8 years of data. These buyers aren’t first-time buyers, or they have very deep pockets for down payments.
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The alligator chomp is coming.
How does anyone get an insured mortgage? You would need to buy a piece of junk condo, and then throw away a few hundred per month in maintenance fees as well.
I agree that it’s an opportunity for home owners who have enjoyed the explosive growth in their home equity to cash out with a DP 20% or greater on another home. They will save money on CMHC moving forward.
However, overall greater debt-loads aren’t good. Neither is the rapid rise in prices. Neither is the prohibitive cost for 1rst time buyers.
Trump wanted to build a wall to keep out Mexicans. In Canada we’re building a wall to keep out 1rst time home buyers.
I would love for someone to explain how the current trend is sustainable long term? What happens when all the baby-boomers pass on, wish to downsize or move into a retirement residence? Who follows to buy all this property at such inflated rates?
I understand that a massive transfer of wealth will occur between the generations, but does this mean that everyone must rent until their parents “kick”, and they get their inheritance money thus enabling them to buy?
It may take another 10-15 years for all this play out, but it’s an idea I ponder.
I also wonder this. Maybe the Feds plan to kick the can down the road and wait for the generational transfer to happen, so that they don’t have to take any real action in the interim.